An empirical analysis of the effects of asymmetric information in the Kano markets for used phones

AshEse Journal of Economics

Vol. 1(3), pp. 030-056, October, 2015

© 2015 AshEse Visionary Limited 

ISSN 2396-8966

 

Full Length Research

Nwauko Azubuike Philip1* and Ashinze Agiliga Paul2

1Department of Economics, Bayero University, Kano, Nigeria.

2AshEse Visionary Limited, 1 Nyanza Street, Woolwich, London, UK.

*Corresponding author. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Received August, 2015; Accepted September, 2015.

 

This research survey examines the consequence of unbalanced information in the Kano used phones markets. The study also examines the degree to which prices convey information on product quality to uninformed party.  Information asymmetry deteriorates the existence of market selling good quality products because the unbalanced information rendered to the buyers during their purchase provokes them to acquire the ownership of it. Incentives were obtainable by the sellers to sell these poor quality products which were also the reason that drive away the good quality businesses from the markets. To properly examine the effects of asymmetric information in the Kano used phones markets, the research administered questionnaire to 50 respondents and conducted interview with 6 respondents, comprising 3 sellers and 3 buyers. The findings of the study suggest that there is a relationship between differences in information available to the market participants and dishonesty rate on the part of the sellers. It revealed that the introduction of warranty, to encourage sales, created incentive for dishonest behavior on the part of the buyers. Hence the presence of moral hazard in the market is reaffirmed. The research further found that the above stated problems are reinforced by the lack of a formal regulatory agency in the markets. Finally, this study recommended the following: the establishment of a formal regulatory agency, registration of sellers with corporate affairs commission (CAC) and the continuous usage of brand names and warranty among others.

 

 

Key words:Asymmetric Information, Adverse Selection. Moral Hazard, Market.

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